Fundamental psychological law

In Keynesian macroeconomics, the Fundamental Psychological Law underlying the consumption function states that marginal propensity to consume (MPC) and marginal propensity to save (MPS) are greater than zero(0) but less than one(1) MPC+MPS = 1

e.g. Whenever national income rises by $1 part of this will be consumed and part of this will be saved

References

  • Keynes, J. M. (1937), "The General Theory of Employment", Quarterly Journal of Economics, 51: 209–223, doi:10.2307/1882087.
  • Albert Hahn, L (1949). The Economics of Illusion:Critical analysis of contemporary economic theory and policy. USA: Squier Publishing company.
  • Murad, Anatol. What Keynes Means. USA.
  • Hirai, Toshiaki (2008). Keynes Theoretical Development- from the tract to the General theory. Milton Park, Abingdon: Routledge.
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